| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥445.5B | ¥390.9B | +14.0% |
| Operating Income | ¥9.7B | ¥13.5B | -27.6% |
| Ordinary Income | ¥6.6B | ¥10.5B | -37.1% |
| Net Income | ¥15.0B | ¥14.5B | +3.8% |
| ROE | 4.1% | 4.1% | - |
For the fiscal year ended March 2026, Shikibo reported Revenue of ¥445.5B (YoY +¥54.7B, +14.0%), Operating Income of ¥9.7B (YoY -¥3.7B, -27.6%), Ordinary Income of ¥6.6B (YoY -¥3.9B, -37.1%), and Net Income of ¥15.0B (YoY +¥0.6B, +3.8%) — a revenue increase with profit decline. Revenue expansion was driven by external sales growth in the Textile segment following business acquisitions (+21.9%), while gross margin fell to 17.2%, down 135bp YoY, reflecting higher raw material costs and a lag in price pass-through that eroded profitability. Operating margin deteriorated approximately 125bp to 2.2% (prior year 3.4%). Ordinary Income was pressured by higher interest expense (¥3.8B, YoY +¥1.2B), while Net Income was supported by extraordinary gains of ¥7.0B, including ¥5.5B of negative goodwill.
[Revenue] Revenue of ¥445.5B (YoY +14.0%) was primarily driven by external sales increases in the Textile segment. Textile revenue rose to ¥246.5B (+21.9%) following the acquisition of the apparel textile business from Unitika Trading Co., Ltd. and the acquisition of operations at Chinese sites, expanding sales scale. Functional Materials grew to ¥68.98B (+12.0%), a double-digit increase, while Industrial Materials was ¥75.3B (+2.8%) and Real Estate & Services ¥59.3B (+1.6%), both showing modest increases. Textile accounted for 54.8% of consolidated sales, increasing its portfolio weight and raising dependency on the Textile business.
[Profitability] Gross profit was ¥76.5B (gross margin 17.2%), up ¥4.1B YoY but with gross margin down 135bp YoY. Rising raw material and energy costs, delayed price pass-through, and segment mix changes pressured margins. SG&A was ¥66.7B (SG&A ratio 15.0%), up ¥7.8B YoY, but SG&A ratio improved ~10bp, reflecting operating leverage on higher sales. Acquisition-related costs of ¥2.4B associated with the Unitika Group business transfers were included in corporate expenses, representing a one-time burden. Operating Income was ¥9.7B (operating margin 2.2%), down 27.6% YoY, as gross margin deterioration outweighed SG&A efficiency. Non-operating interest expense increased to ¥3.8B (YoY +¥1.2B) reflecting higher borrowings. Non-operating income of ¥2.5B (including foreign exchange gains ¥0.5B and dividend income ¥0.4B) was outweighed by non-operating expenses of ¥5.7B, expanding the decline in Ordinary Income to ¥6.6B (-37.1%). Extraordinary gains totaled ¥7.0B, including ¥5.5B of negative goodwill and ¥0.4B from sale of investment securities; extraordinary losses were ¥2.5B (impairment losses ¥1.5B, loss on disposal of fixed assets ¥0.2B, etc.), resulting in profit before tax of ¥11.1B. After corporate taxes of ¥1.6B, Net Income was ¥15.0B (+3.8%). The increase in Net Income was largely due to extraordinary gains, so sustainability requires attention. Conclusion: revenue up, profit down.
The Textile segment reported Revenue of ¥246.5B (+21.9%) and Operating Income of ¥4.7B (+86.6%, margin 1.9%), achieving substantial top-line and profit growth. Business acquisitions expanded sales scale and improved margin versus prior year. Industrial Materials posted Revenue of ¥75.3B (+2.8%) and Operating Income of ¥2.0B (-4.3%, margin 2.6%), a modest profit decline despite slight revenue increase. Functional Materials recorded Revenue of ¥68.98B (+12.0%) and an Operating Loss of -¥1.5B (margin -2.2%), falling into a larger deficit; prior year operating loss was -¥0.2B, indicating delayed profitability for the new core growth business in the medium-term plan. Real Estate & Services reported Revenue of ¥59.3B (+1.6%) and Operating Income of ¥19.0B (-3.7%, margin 32.0%), a small profit decline but maintaining a notably high margin of 32.0%, contributing approximately 195% of consolidated Operating Income of ¥9.7B. Corporate adjustments of -¥14.5B (prior year -¥10.7B) include acquisition-related costs of ¥2.4B, increasing consolidated corporate expense burden YoY.
[Profitability] Operating margin of 2.2% worsened by ~125bp from 3.4% a year earlier, primarily due to lower gross margin. ROE was 4.1%, unchanged from prior year, while Net Profit Margin fell slightly to 3.4% (prior year 3.7%). Total asset turnover improved slightly to 0.47x (prior year 0.46x). Financial leverage rose to 2.59x (prior year 2.43x) due to increased borrowings. ROE decomposition shows lower net profit margin offset by higher leverage, resulting in near-flat ROE. EBITDA was ¥32.8B (Operating Income ¥9.7B + Depreciation ¥23.1B), producing an EBITDA margin of 7.4%, indicating limited cash-generating base. [Cash Quality] Operating Cash Flow was ¥9.1B versus Net Income ¥15.0B, yielding OCF/Net Income of 0.61x, showing divergence as working capital increases (Accounts receivable -¥45.3B, Inventory -¥5.2B, Accounts payable +¥27.4B) pressured cash generation. OCF/EBITDA of 0.28x is low, indicating slow cash conversion of accruals. Working capital days: DSO 87 days (prior 62), DIO 132 days (prior 106), DPO 74 days (prior 59), CCC 145 days (prior 109) — receivables and inventories accumulation tightened cash. [Investment Efficiency] Capital expenditures were ¥15.2B (66% of depreciation ¥23.1B), suggesting mainly maintenance/renewal capex. Tangible fixed assets account for 58.4% of total assets, reflecting a property- and equipment-intensive business model. [Financial Health] Equity Ratio was 38.6% (prior 41.2%), declining; Current Ratio was 138.0% (prior 149.8%), also down, but liquidity maintained at a certain level. Interest-bearing debt totaled ¥296.7B (short-term borrowings ¥142.8B, long-term borrowings ¥153.9B, bonds & bonds due within one year ¥11.4B), with Debt/EBITDA 9.0x and Interest Coverage 2.6x (EBITDA ¥32.8B ÷ interest paid ¥3.8B ÷ 0.9B) indicating limited resilience. Cash and deposits were ¥64.1B versus short-term borrowings ¥142.8B, cash/short-term borrowings 0.45x — short-term liquidity requires attention.
Operating Cash Flow was ¥9.1B (prior ¥21.1B, -57.0%), driven mainly by working capital increases from profit before tax ¥11.1B. Operating CF subtotal (before working capital changes) was ¥13.6B, but increases in accounts receivable -¥45.3B, inventory -¥5.2B, and accounts payable +¥27.4B led to net working capital outflow of -¥23.1B; business expansion and acquisitions increased receivables and inventories, absorbing cash. Investing Cash Flow was -¥46.3B, centered on business acquisitions (-¥26.2B) and capital expenditures (-¥15.2B). Business acquisitions relate to the purchase of the apparel textile business from the Unitika Group and acquisition of Chinese operations as part of growth investments. Free Cash Flow was -¥37.3B (Operating CF ¥9.1B + Investing CF -¥46.3B), a large negative, indicating internal funds cannot cover investments and dividends. Financing Cash Flow was +¥42.9B, with inflows from long-term borrowings ¥95.4B and net increase in short-term borrowings ¥34.2B, partially offset by long-term borrowings repayments -¥69.8B, bond redemptions -¥8.6B, dividend payments -¥6.3B, and share buybacks -¥0.6B. The company funded investments via increased borrowings, raising leverage and interest burden. Cash and deposits rose from ¥59.0B at the beginning of the period to ¥64.1B at period-end (+¥5.3B), reflecting financing support for operating cash shortfall.
Ordinary Income was ¥6.6B while Net Income was ¥15.0B, a difference of +¥8.4B (+127%), mainly due to extraordinary gains of ¥7.0B including ¥5.5B negative goodwill. The negative goodwill arose from business acquisitions from the Unitika Group and is a one-off, not expected to recur. Non-operating income was ¥2.5B (0.6% of Revenue), mainly dividend income ¥0.4B and foreign exchange gains ¥0.5B, providing limited recurring contribution. Non-operating expenses were ¥5.7B (1.3% of Revenue), largely interest expense ¥3.8B, indicating high financing reliance pressuring profits. OCF was ¥9.1B versus Net Income ¥15.0B (OCF/Net Income 0.61x), showing low cash conversion due to receivables and inventory accumulation. Comprehensive income was ¥16.0B (Net Income ¥15.0B + Other Comprehensive Income ¥1.0B); OCI comprised actuarial adjustments related to retirement benefits ¥4.5B, valuation difference on available-for-sale securities ¥1.2B, deferred hedging gains/losses ¥0.6B, and foreign currency translation adjustments ¥0.3B — none of which involve immediate cash flows. Operating-stage earning power is weak; Net Income and Comprehensive Income were supported by extraordinary gains and OCI items.
For the fiscal year ending March 2027, management forecasts Revenue ¥557.0B (YoY +25.0%), Operating Income ¥15.0B (YoY +53.9%), Ordinary Income ¥9.0B (YoY +36.7%), and Net Income ¥6.0B (EPS forecast ¥47.28), with Dividend guidance ¥25 interim / ¥25 year-end (annual ¥50). Revenue is projected to rise significantly assuming full-year contribution from business acquisitions and growth in Textile and Functional Materials. Operating Income guidance of ¥15.0B (+¥5.3B from ¥9.7B this period) assumes profitability recovery in Functional Materials, gross margin recovery, and elimination of acquisition-related costs. Ordinary Income is projected at ¥9.0B, assuming some offset to operating gains from higher financial expenses. Net Income is forecast at ¥6.0B, a large decline from ¥15.0B this period due to the absence of this period’s extraordinary gains (e.g., negative goodwill ¥5.5B); operating-stage performance is expected to improve. Dividend is maintained at ¥50 annual, implying an expected Payout Ratio of ~106%, a high level contingent on earnings improvement. Progress was not disclosed as of Q2; key progress indicators include recovery in operating margin (target ~2.7%) and normalization of working capital metrics (reductions in DSO and DIO).
Annual dividend remains ¥50 (interim ¥25, year-end ¥25), unchanged from prior year. Payout Ratio is 68.7% (dividends ¥6.3B against Net Income ¥15.0B), set at a relatively high level; share buybacks were ¥0.6B (financing CF basis), small but executed. Total Return Ratio is approximately 69%. Operating CF ¥9.1B covers dividends ¥6.3B with a CF coverage ratio of 1.4x, but Free Cash Flow was -¥37.3B, indicating internal funds cannot concurrently finance investments and dividends, necessitating borrowing. Forecast annual dividend for FY2027 remains ¥50; with forecast Net Income ¥6.0B, the implied Payout Ratio is ~106%, a high level that raises sustainability concerns if earnings improvement does not materialize. Future maintenance or increases in dividends depend on improvements in Operating CF (gross margin recovery, working capital compression) and deleveraging.
Gross margin decline risk: Gross margin of 17.2% fell 135bp YoY, and operating margin remains low at 2.2%. Rising raw material and energy costs, lagging price pass-through, and segment mix changes are drivers. Continued volatility in raw material prices, exchange rates, and supply-demand conditions could further affect gross margin. If price pass-through and productivity improvements are delayed, operating income may fall short of plans.
High leverage and interest burden risk: Interest-bearing debt ¥296.7B, Debt/EBITDA 9.0x, Interest Coverage 2.6x indicate limited financial resilience. Cash ¥64.1B vs. short-term borrowings ¥142.8B yields cash/short-term borrowings 0.45x, leaving thin liquidity; rising interest rates or deteriorating refinancing environment could strain funding. Interest expense of ¥3.8B (YoY +¥1.2B) weighs on Ordinary Income; if deleveraging is delayed, interest burden could continue offsetting profit growth.
Working capital increase and cash generation deterioration risk: With DSO 87 days, DIO 132 days, CCC 145 days, working capital turnover has worsened; Operating CF ¥9.1B and net working capital outflow -¥23.1B squeezed cash. OCF/EBITDA 0.28x is low; if receivables and inventory are not compressed, persistent negative Free Cash Flow will lock the company into debt-funded investment and dividend funding. Delays in normalizing working capital could simultaneously increase financing strain and interest burden, eroding financial health.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.2% | 4.6% (1.7%–8.2%) | -2.4pt |
| Net Profit Margin | 3.4% | 3.3% (0.9%–5.8%) | +0.0pt |
Operating margin lags the industry median by 2.4pt, indicating weaker profitability vs. peers, while net profit margin is in line with the median due to extraordinary gains.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 14.0% | 4.3% (2.2%–13.0%) | +9.7pt |
Revenue growth exceeds the industry median by 9.7pt, reflecting active growth investments including business acquisitions.
※ Source: Company aggregation by our firm
While operating-stage earning power deteriorated, Net Income was secured by extraordinary gains (negative goodwill ¥5.5B). FY2027 projects a large drop in Net Income to ¥6.0B due to disappearance of extraordinary gains, but management targets Operating Income of ¥15.0B (+53.9%), signaling a planned substantial improvement at the operating stage. If gross margin recovers and Functional Materials returns to profitability, this could mark a sustainable earnings inflection. Monitor quarterly trends in operating margin improvement and profit trajectory of the Functional Materials segment to assess the plausibility of achieving the plan.
Working capital increases and rising leverage have weakened cash generation and financial resilience (OCF/EBITDA 0.28x, Debt/EBITDA 9.0x, Interest Coverage 2.6x). Future results should be monitored for improvements in DSO, DIO, CCC, recovery in Operating CF, and progress in reducing interest-bearing debt as KPIs. Successful working capital normalization and deleveraging could enable a shift to positive Free Cash Flow and greater dividend sustainability; delays would crystallize financial risks and constrain shareholder return capacity.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.